Sung Wan Jun and Wife, Jung Soon Jun, Individually and as Sole Heirs of the Estate of Ji Hae Jun v. Lloyds and Other Various Insurers

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-00-00110-CV

Sung Wan Jun and wife, Jung Soon Jun, Individually and as Sole Heirs of the

Estate of Ji Hae Jun, Deceased, Appellants

v.

Lloyds and Other Various Insurers, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT

NO. 99-03062, HONORABLE PAUL R. DAVIS, JUDGE PRESIDING

Sung Wan Jun and Jung Soon Jun (collectively, "appellants") obtained a $1.72

million judgment against Risto Miikkulainen ("Miikkulainen") and sought to satisfy it in a direct

action against Lloyds. They appeal from a judgment of the district court denying their motion for

summary judgment and granting Lloyds' motion for summary judgment. Because we conclude

that Miikkulainen is not an insured under the aviation liability policy issued by Lloyds, we will

affirm the district court's judgment.

BACKGROUND

The City of Austin ("City") entered into a lease agreement ("Lease #1"), allowing

Austin Aero, Ltd. ("Aero") to become a fixed base operator ("FBO") at Robert Mueller Airport.

Lease #1 required that Aero carry a minimum amount of liability insurance for the protection of

the City. Lloyds provided such insurance, through its agent Sedgwick, to PLM International and

PLM Financial Services (collectively, "PLM"), to cover them and their subsidiaries. As a PLM

subsidiary, Aero was covered under the policy. Lloyds presented a certificate of insurance

("certificate") to the City, indicating that Lloyds was providing Aero's aviation liability insurance,

subject to the terms of policy number V4K690B.

As permitted by the terms of Lease #1, Aero entered into a commercial contract

("Lease #2") whereby Bell Flight Training, Inc. ("Bell Flight") could conduct aircraft rental and

flight instruction at the airport, and use facilities within Aero's FBO. Bell Flight was not a

subsidiary of PLM or Aero, and thus was not a named insured or additional insured under the

Lloyds policy. Aero and Bell Flight did not share employees or flight equipment. The only

relationship between Aero and Bell Flight was the contractual one of lessee/sublessor and

sublessee. Bell Flight did not contract directly with either the City or Lloyds.

On January 24, 1995, Miikkulainen rented a Cessna 152 Aerobat airplane from Bell

Flight. Ji Hae Jun ("decedent") was Miikkulainen's passenger on the flight to Sugar Land

Municipal Airport. In preparation for the return flight, Miikkulainen instructed decedent to exit

the airplane and remove the chock from in front of the wheels. In doing so, decedent was struck

by the airplane propeller and died as a result of her injuries. Shortly thereafter, as sole heirs of

decedent's estate, appellants filed suit against Miikkulainen. No other defendants were joined in

that suit. After an actual, contested trial, appellants obtained a judgment in their favor for more

than $1.72 million.

In March 1999, appellants filed suit against Lloyds in an attempt to collect on the

judgment obtained against Miikkulainen. (1) In the district court, appellants contended that Lloyds

was liable for payment of the judgment because Miikkulainen was an omnibus insured (2) under the

policy issued to cover Aero.

In September, Lloyds filed its motion for summary judgment on the grounds that

appellants lacked standing, or alternatively, were barred from bringing a direct action against

Lloyds. Appellants then filed their own motion for summary judgment requesting that the court

find, as a matter of law, that Lloyds breached its contractual duty to indemnify Miikkulainen and

must indemnify him for the amount of the judgment entered in favor of appellants. In November,

the district court entered an order granting Lloyds' motion and an order denying appellants'

motion. Appellants seek a reversal of the judgment in favor of Lloyds and rendition of a judgment

in their favor, or alternatively, a remand to the trial court for resolution of any material fact issues.

STANDARD OF REVIEW

When both parties move for summary judgment, each party must carry its own

burden as the movant. City of Houston v. McDonald , 946 S.W.2d 419, 420 (Tex. App.--Houston

[14th Dist.] 1997, writ denied). When both motions are before the court, the court may consider

all the summary judgment proof in deciding whether to grant either motion. Id. The court can

rely on one party's proof to supply missing proof in the other party's motion. Seaman v. Seaman ,

686 S.W.2d 206, 210 (Tex. App.--Houston [1st Dist.] 1984, writ ref'd n.r.e.). The court may

affirm the summary judgment, reverse and render a judgment for the other party, or reverse and

remand if neither party has met its burden. Calhoun v. Killian , 888 S.W.2d 51, 54 (Tex.

App.--Tyler 1994, writ denied). The function of summary judgment is not to deprive litigants of

the right to trial by jury, but to eliminate "patently unmeritorious claims or untenable defenses."

Swilley v. Hughes , 488 S.W.2d 64, 68 (Tex. 1972) (citation omitted). On appeal, all reasonable

inferences will be indulged, and all doubts will be resolved in favor of the losing party. University

of Tex. Health Sci. Ctr. v. Big Train Carpet, Inc ., 739 S.W.2d 792, 792 (Tex. 1987). The

propriety of summary judgment is a question of law; therefore, we review the trial court's decision

de novo . Texas Dep't of Ins. v. American Home Assurance Co. , 998 S.W.2d 344, 347 (Tex.

App.--Austin 1999, no pet.). "When a trial court's order granting summary judgment does not

specify the ground or grounds relied on for its ruling, summary judgment will be affirmed on

appeal if any of the theories advanced are meritorious." Carr v. Brasher , 776 S.W.2d 567, 569

(Tex. 1989).

DISCUSSION

Appellants contend that the trial court erred when it determined that their judgment

against Miikkulainen was not enforceable in a direct action against Lloyds, granted Lloyds' motion

for summary judgment, and denied their own. Under Texas law, a plaintiff generally may not

bring a direct action against an insurer. Burton v. State Farm Mut. Auto. Ins. Co. , 869 F. Supp.

480, 486 (S.D. Tex. 1994), aff'd , 66 F.3d 319 (5th Cir. 1995). A limited exception allows a third

party to sue an insurer if the liability of an insured has been established by judgment or written

agreement with the insurer. Id . Appellants' judgment in the contested negligence trial is solely

against Miikkulainen. They argue that they have standing to sue Lloyds to recover this judgment

because Miikkulainen is an omnibus insured under the policy issued by Lloyds for Aero.

Appellants concede that neither Bell Flight nor Miikkulainen were named insureds

in the policy; nor were they additional insureds, as was the City. Appellants propose several

theories to demonstrate how Miikkulainen became an omnibus insured under a policy to which he

was a stranger. We will examine each in turn.

A. The City Standards

Lease #1 requires Aero to comply with "all federal, state or local statutes,

ordinances, regulations and standards applicable to Lessee or its use of the demised premises."

The Minimum Standards for Commercial Aeronautical Activities on Robert Mueller Municipal

Airport ("standards"), adopted by Austin City Council ordinance, require that "[a]ny lessee

desiring to engage in the rental of aircraft to the public must provide as a minimum the following:

Public liability and property damage insurance with limits of not less than $1,000,000 . . . [and]

Renter Pilot . . . insurance . . . in an amount determined by the City Attorney." Lease #1

expressly incorporates the standards as additional terms of the lease . However, appellants argue

that (1) the standards are incorporated as terms of the Lloyds insurance policy as a matter of law;

(2) therefore, the policy provides renter pilot liability coverage as a matter of law; and (3) this

coverage extends to Bell Flight and its customer, Miikkulainen.

The standards set forth the City's requirements for lessees at the airport. They

require insurance of various types and amounts, depending on the specific aeronautical activities

in which the lessees engage. All lessees are required to obtain proof of public liability and

property damage insurance of at least $1 million, which names the City as an additional insured.

Only lessees who engage in aircraft rental, flight training, or flying club must carry additional

renter pilot coverage in an amount required by the city attorney. The standards define the duties,

rights, and liabilities of the parties to airport leases and subleases, (3) and are enforceable among

those parties. As the lessor, the City could require Aero and Bell Flight to carry insurance for

those aeronautical activities in which they were engaged at the airport. However, Lloyds was not

a party to either Lease #1 or Lease #2. Lloyds' duties, rights, and liabilities are defined by the

terms of the insurance policy.

Appellants cite several cases for the proposition that the standards are terms of the

insurance policy as a matter of law. We find these cases distinguishable. Courts in the cited cases

were interpreting or applying statutes that expressly defined insurance contract terms, required

insurance for the benefit of judgment creditors, created insurance coverage as a matter of law, or

defined the rights and liabilities of the parties to insurance contracts. Camden Fire Ins. Ass'n v.

Clayton & Co. , 6 S.W.2d 1029, 1030 (Tex. 1928) (applying statute protecting interest of

mortgagee under fire insurance policies from "any act or neglect of the mortgagor or owner of the

property insured by said policy," court concluded that statute created independent contract between

mortgagee and insurer); Scanlan v. Home Ins. Co. , 79 S.W.2d 186, 190 (Tex. Civ.

App.--Beaumont 1935, writ ref'd) (stating that parties cannot contract "that a fire loss which under

the law is total shall be deemed to be only partial"); Pan-American Cas. Co. v. Basso , 252 S.W.2d

505, 506 (Tex. Civ. App.--El Paso 1952, writ ref'd) (interpreting ordinance in which city

simultaneously granted franchise and expressly required cab company to post bonds or insurance

policies for benefit "of every judgment creditor who has been injured through the negligent

operation of its automobiles"); Carroll v. Universal Underwriters Ins. Co. , 613 S.W.2d 815, 817

(Tex. App.--Houston [14th Dist.] 1981, writ ref'd n.r.e.) ("Only statutes bearing on the subject

matter of insurance contracts, or which define the rights and liabilities of parties to such contracts,

need be considered as applicable."); Howard v. INA County Mut. Ins. Co. , 933 S.W.2d 212, 218

(Tex. App.--Dallas 1996, writ denied) (applying statute which prohibited delivery of any auto

insurance policy that did not provide for UM/UIM coverage, court concluded that "every

automobile liability policy of insurance delivered in this State includes UM/UIM coverage by

operation of law").

There is no proof in the record that the City intended to define the duties, rights,

and liabilities of parties to public liability, property damage, or renter pilot insurance contracts.

The standards do not attempt to define contract terms, create coverage, protect third-party

beneficiaries (other than the City itself), or require specific policy terms as a matter of law. We

conclude that the standards are not incorporated as terms of the insurance policy; therefore, the

policy does not provide renter pilot insurance as a matter of law.

B. The Existence of Non-delegable Duties

Appellants assert that (1) Lease #1 created a non-delegable duty for Aero to carry renter pilot

insurance; (2) Aero attempted to impermissibly delegate this duty to Bell Flight; (3) because

Lloyds certified that it insured Aero, Lloyds had a duty to provide this "mandatory" renter pilot

insurance; and (4) therefore, as a matter of law, the policy provides renter pilot insurance

extending not only to Aero, but also to Bell Flight, and Bell Flight's customers. We reject this

analysis.

(1) Franchise Analysis

Appellants argue that Lease #1 constitutes a "franchise," which makes Aero strictly

liable for all aeronautical activities authorized by Lease #1, irrespective of who is conducting those

activities.

A franchise is a special privilege conferred by government upon an individual or

organization which does not belong to the citizenry at large, and in which activity

one otherwise could not engage without the franchise.

. . . .

Franchises under Texas case law generally take the form of utilities, or

other monopolies, created to further the public interest. Moreover, there must exist

a contract between grantor and grantee which is mutually binding and enforceable.

Whether an instrument, ordinance, or contract amounts to a franchise depends

largely upon the manner of its performance in compliance with its terms.

. . . .

. . . One who claims a franchise right or privilege in derogation of the

common rights of the public must prove his title thereto by a grant clearly and

definitely expressed, and cannot enlarge it by equivocal or doubtful provisions or

probable inferences.

State v. Operating Contractors ABS Emissions, Inc. , 985 S.W.2d 646, 653 (Tex. App.--Austin

1999, pet. denied) (citations omitted).

We note that Lease #1 "grant[s] to [Aero] the non-exclusive right and privilege to

conduct business normally provided by a Fixed Base Operator on Airport." (Emphasis added.)

This grant was "conditioned upon the right to use said public airport facilities in common with

others authorized to do so." (Emphasis added.) There is no indication that either the City or Aero

considered Lease #1 the grant of an exclusive franchise . Not only do we reject the argument that

Lease #1 created an exclusive franchise, we note that, as in Operating Contractors , any putative

franchise runs only to the grantee, in this case Aero, that contracted with the legislative body, the

City. See id . Lloyds was not a party to either Lease #1 or Lease #2, had no duty to inspect the

leases, and had no contractual relationship with either the City or Bell Flight. Appellants do not

assert that Lloyds was granted a franchise. Any case against Lloyds rises or falls based on the

express terms of the insurance policy and the certificate.

(2) Contract Analysis

Appellants' assertion that Aero was required to carry renter pilot insurance is

contradicted by a careful reading of Lease #1 and the standards. Article VI of Lease #1 governs

insurance matters and expressly provides as follows:

The Lessee shall secure public liability and property damage insurance in

which the City shall be named an additional insured with the Lessee. . . . Said

insurance shall protect the City against any and all liability for death, injury, loss

or damage arising out of any of the following conditions:

1. The negligent operation of Lessee's equipment at or about the

Airport, or for

2 The negligence of Lessee's agents, servants or employees.

Such policy or policies shall be for not less than the amount of $1,000,000

combined single limit and . . . shall be held for the benefit of the parties as their

respective interests may appear.

In addition, Aero was required to carry hangar keepers liability, fire, and extended coverage. The

terms of Lease #1 did not require Aero to carry renter pilot insurance. Appellants do not assert

that the accident occurred in the "negligent operation of [Aero's] equipment." (4)

As noted above, the standards were expressly incorporated as terms of Lease #1 and

as a result, bound Aero. The standards are comprised of eleven discrete sections defining the

specific requirements for lessees engaging in various aeronautical activities. The standards require

that (1) every lessee carry public liability and property damage insurance naming the City as an

additional insured; (2) lessees engaging in aircraft rental, flight training, or flying clubs carry

renter pilot insurance; (3) lessees engaging in two or more commercial aeronautical activities carry

"each type of insurance required for the specific activity." Aero did not engage in any aeronautical

activity requiring renter pilot insurance under the standards. (5)

It stands to reason that if Aero did not have a duty to carry renter pilot insurance,

it did not attempt an impermissible delegation of that duty to Bell Flight. Furthermore, we note

that Lease #1 permitted Aero to do exactly what appellants maintain it could not: delegate its

rights and responsibilities under Lease #1, in whole or in part. Lease #1 provides as follows:

The Lessee may rent or sublease the demised premises . . . but Lessee shall

not rent or sublease all or any part of such premises or the improvements located

thereon, including shop or office space, for any purpose without the prior written

consent of City. Lessee may, with the prior written consent of City, assign this

lease; but in such event, Lessee shall be relieved of any further obligation

hereunder, and the City will look solely to such approved assignee for performance

of this lease subsequent to the date of such approved assignment.

The standards also provide that "[e]xisting FBOs have the right, with the written prior consent of

the City, to enter into sublease agreements for the conduct of aeronautical activities specified in

their lease agreements. Any such sublease will be subject to the provisions of these minimum

standards and the terms of the FBO agreement." (6)

Lease #1 and the standards permitted Aero to enter Lease #2 for Bell Flight's use

of the premises and the conduct of aeronautical activities with the City's consent. While there was

no impermissible delegation of duties, a valid sublease existed, under which Bell Flight became

subject to the terms of both leases and the standards. Because Bell Flight engaged in aircraft

rental, Bell Flight was required to carry renter pilot insurance. If Bell Flight failed to satisfy the

terms of the leases or the standards, the proper remedy is not judicial modification of the terms

of the Lloyds-Aero insurance policy.

C. The Certificate of Insurance

As noted, Lease #1 required Aero to carry public liability and property damage

insurance naming the City as an additional insured. Lease #1 also required that "[c]opies of all

such policies or certificates of insurance shall be delivered to the City and shall be held for the

benefit of the parties as their respective interests may appear." Certificate number PLM002 is in

the record and reflects the following: (1) Aero was a named insured; (2) the City was an

additional insured; (3) Lloyds was the insurer; (4) policy number V4K690B was effective

November 1, 1994, for a one-year period; (5) Lloyds provided aviation liability insurance "up to

a combined single limit of not less than $1,000,000 any one accident/occurrence," subject to the

terms of policy number V4K690B; (6) Lloyds acknowledged the existence of Lease #1; and (7)

the certificate did not "amend, extend or otherwise alter the terms, conditions, limitations or

exclusions of the polic[y] referred to."

Appellants argue that (1) the standards absolutely required Aero to secure renter

pilot insurance; (2) the standards are incorporated as terms of Lease #1; (3) the certificate

acknowledges Lease #1; (4) the insurance policy does not expressly exclude renter pilot insurance;

(5) therefore, Lloyds certified to the City that it provided all coverage required by Lease #1,

including renter pilot insurance. We disagree.

We have already held that the standards and Lease #1 did not require Aero to secure

renter pilot insurance. However, we also disagree with appellants' reading of the certificate.

Appellants state that "Lloyds certified to the City of Austin that Austin Aero FBO, Ltd. had the

required insurance for the activities conducted under Austin Aero FBO, Ltd.'s lease." They read

the certificate as Lloyds' guarantee to the City that Lloyds was providing all the insurance required

by Lease #1. To the contrary, the certificate only documented that Lloyds provided aviation

liability insurance subject to the terms of policy number V4K690B. As noted above, Lloyds was

not a party to either Lease #1 or Lease #2, had no duty to inspect the leases, and had no

contractual relationship with the City. Any case against Lloyds rises or falls based on the express

terms of the insurance policy and the certificate, which did not purport to provide renter pilot

insurance or coverage for Aero's sublessees.

D. Respondeat Superior

Appellants contend that Aero's involvement in Bell Flight's business exceeded that

of sublessor. They state in their brief that Bell Flight rented airplanes "with the approval,

knowledge and actual participation of Austin Aero FBO" and that "Austin Aero FBO, Ltd.,

actually rented the aircraft to Risto Miikkulainen. . . . Bell Flight Training, Inc. was not involved

in the renting of this aircraft." Appellants cite several cases and observe that "[t]his in effect

creates a respondeat superior situation." (7)

The doctrine of respondeat superior presupposes that the employer is responsible

for the acts of his employee , acting in the scope of his employment, where

negligence of the employee is shown to have been the proximate cause of the

occurrence. Judgment is allowed against the employer, not because of an overt

negligent act of the employer because he committed no wrongful act, but because

of a recognized legal fiction . . . .

Marange v. Marshall , 402 S.W.2d 236, 238-39 (Tex. Civ. App.--Corpus Christi 1966, writ ref'd

n.r.e.) (emphasis added).

The parties do not dispute whether Bell Flight rented airplanes with the approval

and knowledge of Aero. However, "[i]t is an elementary principle that before one person can be

held responsible for the acts of another, in the absence of special circumstances, it must appear

that the latter was the agent of the former." Moreland v. Leslie , 166 S.W.2d 902, 904 (Tex.

1942). Aero's approval and knowledge did not make it liable for Bell Flight's conduct.

Furthermore, appellants have not directed us to any evidence supporting the assertion that Aero's

"participation" in Bell Flight's business exceeded that expected of a commercial sublessor. (8) The

evidence certainly does not support the assertion that Aero was conducting an airplane rental

business in which Bell Flight "was not involved." Appellant has presented no evidence that Aero

shared any profits from or maintained control of Bell Flight's airplane rental business. Appellants

have failed to direct our attention to any evidence showing that an employment relationship existed

between Aero and any Bell Flight employees.

In addition, recovery under this theory must fail because it depends upon the

derivative liability of an employer for the negligence of an employee . Even if proof of a

respondeat superior relationship between Aero and Bell Flight did exist, it would not automatically

result in appellants' recovery against Lloyds. Appellants have never alleged that any Bell Flight

employee's negligence was the proximate cause of injuries to the decedent. The negligent party,

Miikkulainen, was Bell Flight's customer .

E. Coverage Under Express Terms of the Policy

(1) Policy Coverage for Aircraft in Which Aero Had a "Financial Interest"

Appellants make several attempts to bring Miikkulainen, and the aircraft he rented

from Bell Flight, under the express terms of the Lloyds insurance policy. We will examine these

policy terms in succession. The Lloyds policy provided aviation liability coverage for damages

caused by operation of aircraft in which Aero held an interest "as owner, lessor or lienholder of

the aircraft or arising out of any other aircraft in which [Aero] has a financial interest." Aero was

not the owner, lessor, or lienholder of the plane rented by Miikkulainen, but appellants assert that

Aero had a "financial interest" in the plane. Appellants cite Southwestern Graphite for the

proposition that a lessor has an "insurable interest" in the lessee's chattels. Southwestern Graphite

Co. v. Fidelity & Guar. Ins. Corp ., 201 F.2d 553, 555 (5th Cir. 1953). They assert that when

Aero entered Lease #2 with Bell Flight, Aero automatically acquired an "insurable interest" or

"financial interest" in Bell Flight's plane, bringing it under coverage of the policy. Southwestern

Graphite does not support this argument. In that case, the lessor's insurable interest arose by

virtue of the chattel mortgage it retained on personal property sold to the lessee. Aero had no such

interest in Bell Flight's aircraft.

(2) Policy Definition of an "Insured"

The policy definition of an "insured" includes any person, while operating an

aircraft, and any person or organization legally responsible for operation of an aircraft that (1) had

been repossessed or acquired by Aero; or (2) was being used for industrial aid or charter purposes.

Such a person or organization qualifies as an insured only if "the actual operation [was] with the

expressed permission of" Aero. Appellants argue that Miikkulainen qualified as an insured under

this policy term because he had the "express permission" of Aero to operate the airplane that

caused decedent's injuries.

The summary judgment record contains no evidence that Aero had repossessed or

acquired the plane flown by Miikkulainen or that the plane was being flown for industrial aid or

charter purposes. Aero's acquiescence in Bell Flight's conduct of its rental business does not rise

to the level of "express permission." We find this definition inapplicable to Miikkulainen.

(3) Policy Provided Coverage for Named Insured's "Lessee"

Appellants argue that "the policy clearly contemplates coverage of aircraft owned

by the named insured's lessee and the operators of said aircraft." They base this conclusion on

two terms of the policy. First, appellants misconstrue a policy declaration regarding the limits of

aviation liability coverage which states, in part, "In the event the amount of aircraft operator's or

lessee's insurance is less than US $250,000,000 any one occurrence, such insurance as is afforded

by this Policy shall apply in excess of such other insurance." Appellants interpret this declaration

to mean that the Lloyds policy will supplement any policy owned by any lessee, such as Bell

Flight. They conclude that because Bell Flight has no such policy, Lloyds is liable for the entire

judgment against Miikkulainen.

Second, appellants quote a condition of the aviation liability coverage requiring that

any "lessee or mortgagor effect aircraft bodily injury, property damage and passenger insurance"

naming Aero as an additional insured. The condition also states that "inadvertent omission by the

Insured shall not prejudice the coverage provided under this Part II of the Policy." Appellants

conclude that Bell Flight's lack of liability insurance is an "inadvertent omission" that should not

prejudice the coverage provided by the Lloyds policy and that "[t]his proves as a matter of law that

Bell Flight Training, Inc.'s aircraft is covered by Appellee's policy."

Appellants misapprehend the meaning of the word lessee in the declaration and the

condition. Both refer to insurance carried by a party that is leasing or mortgaging aircraft of

which Aero is the lessor or mortgagee. The declaration expressly refers to Aero's "interest as

owner, lessor or lienholder of the aircraft or arising out of any other aircraft in which the Insured

has a financial interest" and provides for payment on the policy only "in the event [Aero] does not

receive indemnity under the operators policy carried by the lessee/mortgagor ." (Emphasis added.)

Likewise, the condition refers specifically to lease or loan instruments "concerning the aircraft

insured hereunder" and not any other type of lease or loan instruments. Bell Flight's rental plane

is not covered by either term.

F. Public Policy Considerations

Appellants argue that "[a]s a matter of public policy, Appellee Lloyds should be

required to provide insurance coverage to cover the claims of appellants against the rental pilot

flying an airplane under Aero FBO, Ltd.'s lease." Appellants maintain that Lease #1 and the

standards are evidence of the City's intent to protect the public by making FBOs strictly liable for

all aeronautical activities authorized by their leases. This argument is founded on an erroneous

reading of the City's standards. Appellants state that the standards required all FBOs "to carry

rental pilot insurance coverage if rental operations were being conducted from its [sic] premises ."

(Emphasis added.) However, the standards do not require FBOs to insure all aeronautical

activities conducted on the demised premises. They require that lessees carry coverage for those

aeronautical activities in which they are engaged . (9) For example, the standards require that "[a]ny

lessee desiring to engage in the rental of aircraft to the public must provide . . . Renter Pilot . . .

insurance." (Emphasis added.)

Finally, even if Aero failed to comply with the lease requirements, Lloyds would

not necessarily be liable for that failure. Public policy does not dictate that insurance companies

monitor and attempt to enforce their clients' contracts with third parties.

For the above reasons, we conclude that Miikkulainen was not an omnibus insured

on the policy issued by Lloyds to Aero. Given our disposition of this issue, we need not address

appellants' remaining issues.

CONCLUSION

The summary judgment record conclusively establishes that appellants' judgment

debtor, Miikkulainen, was not an insured under the Lloyds policy. The trial court properly

granted Lloyds' motion for summary judgment and denied appellants' motion for summary

judgment. The judgment of the district court is affirmed.

Mack Kidd, Justice

Before Justices Kidd, Yeakel and Powers *

Affirmed

Filed: November 9, 2000

Publish

* Before John E. Powers, Senior Justice (retired), Third Court of Appeals, sitting by assignment.

See Tex. Gov't Code Ann. § 74.003 (b) (West 1998).

1. Although the record is unclear, appellants' counsel stated at oral argument that both

Miikkulainen and Bell Flight were uninsured.

2. An omnibus clause is defined as "a clause or section (as of a contract or statute) intended

to cover various items not otherwise specifically covered; esp: a clause in an automobile insurance

policy that extends protection to others than the named insured." Webster's Third New

International Dictionary 1574 (1986).

3. The standards state that "FBOs have the right . . . to enter into sublease agreements . . . .

Any such sublease will be subject to the provisions of these minimum standards and the terms of

the FBO agreement."

4. Appellants do make a respondeat superior argument that may go to the second condition in

Article VI of Lease #1. This argument will be considered in due course.

5. Appellants cite the General Conditions of the insurance policy providing that "[t]erms of this

Policy which are in conflict with the statutes of the state wherein this Policy has application are

hereby amended to conform to such statutes." Appellants argue that the insurance policy must be

judicially amended to conform to "aviation ordinances" (referring to the standards) requiring renter

pilot coverage. Because we conclude that the standards did not require Aero to carry renter pilot

coverage, we reject this argument.

6. The record does not contain any document evidencing the City's written prior consent to

Lease #2 or a copy of that lease. However, the validity of Lease #2 and Bell Flight's compliance

with its terms have never been challenged and are not before us. Nor does the record indicate Bell

Flight's noncompliance with the City's standards.

7. It is not entirely clear whether appellants are arguing that liability exists under the

respondeat superior doctrine. Their brief posits this theory, but at oral argument, appellants'

counsel conceded that Aero was not renting airplanes "directly" to the public and that Aero did

not "control the business of Bell."

8. Appellants rely on evidence in the summary judgment record that Bell Flight and its

customers were allowed to use Aero's pilots' briefing room, but this falls far short of establishing

any type of control other than that of an ordinary sublessee relationship.

9. At oral argument appellants' counsel conceded that the City accepted Aero's policy as

satisfactory, although it did not provide renter pilot insurance.

protect the public by making FBOs strictly liable for

all aeronautical activities authorized by their leases. This argument is founded on an erroneous

reading of the City's standards. Appellants state that the standards required all FBOs "to carry

rental pilot insurance coverage if rental operations were being conducted from its [sic] premises ."

(Emphasis added.) However, the standards do not require FBOs to insure all aeronautical

activities conducted on the demised premises. They require that lessees carry coverage for those

aeronautical activities in which they are engaged . (9) For example, the standards require that "[a]ny

lessee desiring to engage in the rental of aircraft to the public must provide . . . Renter Pilot . . .

insurance." (Emphasis added.)

Finally, even if Aero failed to comply with the lease requirements, Lloyds would

not necessarily be liable for that failure. Public policy does not dictate that insurance companies

monitor and attempt to enforce their clients' contracts with third parties.

For the above reasons, we conclude that Miikkulainen was not an omnibus insured

on the policy issued by Lloyds to Aero. Given our disposition of this issue, we need not address

appellants' remaining issues.

CONCLUSION

The summary judgment record conclusively establishes that appellants' judgment

debtor, Miikkulainen, was not an insured under the Lloyds policy. The trial court properly

granted Lloyds' motion for summary judgment and denied appellants' motion for summary

judgment. The judgment of the district court is affirmed.

Mack Kidd, Justice

Before Justices Kidd, Yeakel and Powers *

Affirmed

Filed: November 9, 2000

Publish

* Before John E. Powers, Senior Justice (retired), Third Court of Appeals, sitting by assignment.

See Tex. Gov't Code Ann. § 74.003 (b) (West 1998).

1. Although the record is unclear, appellants' counsel stated at oral argument that both

Miikkulainen and Bell Flight were uninsured.

2. An omnibus clause is defined as "a clause or section (as of a contract or statute) intended

to cover various items not otherwise specifically covered; esp: a clause in an automobile insurance

policy that extends protection to others than the named insured." Webster's Third New

International Dictionary 1574 (1986).

3. The standards state that "FBOs have the right . . . to enter into sublease agreements . . . .

Any such sublease will be subject to the provisions of these minimum standards and the terms of

the FBO agreement."

4. Appellants do make a respondeat superior argument that may go to the second cond